October 12, 2012.
Via Federal Express & Website Submission (http://www.regulations.gov).
Jennifer J. Johnson, Secretary
Monica Jackson
Board of Governors of the Federal Reserve System Office of the Executive Secretary
20th Street and Constitution Avenue, NW
Bureau of Consumer Financial Protection
Washington, DC 20551.
1700 G Street, NW
Washington, DC 20552.
Alfred M. Pollard, General Counsel
Attention: Comments/RIN 2590-AA58
Federal Housing Finance Agency, Eighth Floor
400 Seventh Street, SW
Washington, DC 20024.
Office of the Comptroller of the Currency
250 E Street SW, Mail Stop 2-3
Washington DC 20219.

Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429.
Mary Rupp, Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428.
Re:

Appraisals for Higher Risk Mortgage Loans.
Truth in Lending Act (TILA) & Regulation Z.
Board: DocketNumberR-1443.
FDIC: Truth in Lending Act (Regulation Z).
NCUA: RIN 3133-AE04.

Bureau: DocketNumberCFPB-2012-0031.
FHFA: RIN 2590-AA58.
OCC: Appraisals for Higher-Risk
Mortgage Loans.

Dear Ladies and Gentlemen:
Vanderbilt Mortgage and Finance, Inc. ("Vanderbilt") is writing to comment on the "TILA appraisal rule"
identified above. The TILA appraisal rule has been jointly issued by the Board of Governors of the
Federal Reserve System, the Bureau of Consumer Financial Protection ("the CFPB"), the Federal Deposit
Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration,
and the Office of the Comptroller of the Currency (collectively "the Agencies"). Vanderbilt's comments
are addressed to the CFPB's version of the TILA appraisal rule, which appears at 77 Federal Register
54721 (September 5, 2012).
Vanderbilt specializes in the financing of factory-built housing, primarily manufactured homes ("MHs").
Vanderbilt makes both "home only" loans (secured solely by the M H as personal property, also known
as "chattel" loans), and "land home" loans (secured both by the M H and the land on which it is located).
Vanderbilt is a member of the Clayton Homes family of companies. Clayton Homes is one of the nation's
largest home builders, having produced more than 72,000 factory-built single family homes over the
past 3 years, including 22,792 homes in 2011.
The factory-built housing industry is a key provider of jobs and affordable housing in the United States.
The industry includes about 2,500 retailer locations, over 120 manufacturing locations, plus thousands
of M H community locations and related component and supply providers. In 2011, according to the
Vanderbilt Mortgage and Finance, Inc.
PO Box 9800, Maryville, TN 37802
Phone: 865-380-3000

•

•

Fax: 865-380-3750

500 Alcoa Trail, Maryville, TN 37804
•

Toll Free:

800-970-7250.

.

www.vmf.com,

 Manufactured Housing Institute ("MHI"), the industry accounted for over 58,000 jobs.page2.According to
2006-2010 Census Bureau data, there were 8.7 million MHs in the country, which MHs comprised 6.7%
of the nation's total housing units and 9.9% of the nation's total single family units (both detached and
attached). According to 2011 Census Bureau data, 72% of new homes sold under $125,000 were MHs,
as were 47% of new homes sold under $150,000 and 27% of new homes sold under $200,000. Again
according to MHI, over 60% of all M H buyers finance their purchases with home only loans, and over
60% of all MHs are located in rural areas. Since 2011, Vanderbilt's loans have been 54% home only
(8,198 loans) and 46% land home (7,066 loans). Our average home only loan amount has been $47,167,
with an average Beacon score of 649 (excluding zero scores). Our average land home loan amount has
been $76,003, with an average Beacon score of 630 (again excluding zero scores).
1. The Agencies should exclude all M H loans, both home only and land home, from the definition
of "higher-risk mortgage loan." (Replying to Questions 11 and 14.).
The Agencies are proposing to exclude home only, but not land home, M H loans from the TILA appraisal
rule, as follows: "Notwithstanding paragraph (a)(2)(i) of this section, a higher-risk mortgage loan does
not include: ... (C) A loan secured solely by a residential structure." (Proposed §1026.XX(a)(2)(ii)(C). 77
FR at 54772. Emphasis added.)
For the reasons given below, the Agencies' proposed exclusion should be expanded to cover all M H
loans, both home only and land home, as follows: "Notwithstanding paragraph (a)(2)(i) of this section, a
higher-risk mortgage loan does not include: ... (C) A loan secured in whole or in part by a manufactured
home as defined in HUD regulation 24 CFR 3280.2." (Emphasis added.) Replacing the words "solely by"
with "in whole or in part by" will include land home M H loans within the proposed exclusion. At the
same time, replacing "residential structure" with the "manufactured home" definition from Regulation
X section 1024.2(b) will keep site-built homes out of the proposed exclusion, thereby limiting the
proposed exclusion to MHs, which are the most adversely affected by the appraisal requirements. This
limitation also appears to be consistent with the Agencies' intent. (See 77 FR at 54732-54733.)
The Dodd-Frank Act expressly authorizes the Agencies to exempt any class of loans from the TILA
appraisal rule upon determining that the exemption is in the public interest and promotes the safety
and soundness of creditors. For the reasons given below, excluding all M H loans, both home only and
land home, from the TILA appraisal rule will meet these exemption standards. (Dodd-Frank Act § 1471,
adding new §129H(b)(4)(B) to the Truth in Lending Act.)
In a nutshell, the Agencies' rationale for the limited scope of the proposed exclusion is that traditional
real estate appraisals performed by certified or licensed appraisers "are not appropriate or feasible" for
home only M H loans, but "are feasible" for land home M H loans. 77 FR at 54733. Vanderbilt agrees as
far as home only M H loans are concerned, but we strongly disagree with the Agencies' understanding
that traditional appraisals "are feasible" for the great majority of land home M H loans.
As explained below, the prohibitive problems with requiring traditional appraisals for M H loans result
from the presence of the MHs in the transactions, rather than from whether or not the MHs happen to
be sold and financed by themselves or as part of land home packages. Thus the very same reasons why
traditional appraisals won't work for home only loans will also apply with equal force to the great
majority of land home loans, as follows:page3.

 a.

Lack of sufficient qualified appraisers.
Certified or licensed appraisers are typically trained to perform site-built and land only
appraisals. For the most part, they are neither trained nor experienced with appraising
MHs, either by themselves or along with the land. Most appraisers, for example, don't
know about (and physically cannot find) the HUD seals and data sheets that are located
on every M H unit. These HUD seals and data sheets contain compliance certifications
and M H specifications that are critical for determining value. An M H appraisal cannot be
performed without examining these items, regardless of whether the appraisal will
cover just the M H itself or both the M H and the land. In addition, those appraisers who
are qualified by training and experience to perform M H appraisals, unfortunately, are
very few and far between. In many rural areas, where the majority of MHs are located,
there are literally no qualified M H appraisers who are available to do the job, regardless
of whether the job is for a home only or land home transaction.

b.

Lack of sufficient comparable sales.
Other than in California, which has a limited data base of resale prices for home only
transactions, there are virtually no comparable sales transactions that are available for
use when performing appraisals for M H loans, whether they be home only or land
home. Without sufficient comparable sales transactions, appraisers will not be able to
develop accurate valuations for M H loans, for either home only or land home
transactions. This lack of comparable sales is especially severe in rural areas where new
and used M H sales and loans tend to be concentrated.
i.

ii.

Home only.
Sufficient comparable sales for home only transactions simply don't exist
anywhere other than in California. Home only transactions generally are not
listed on M L S services. Consequently, there is no broadiy available data base of
any of the home only sales that are made by M H retailers or manufacturers, by
M H communities, or by individual M H owners (selling direct to buyers).
Land home.
Traditional appraisals - where both the home and the land are appraised
together - typically are performed only for FHA Title I I land home M H loans,
and also for those FHA Title I land home loans that have a used M H that is
already located on the land. Traditional appraisals typically are not performed
for conventional (i.e., non-GSE) land home M H loans, or for FHA Title I land
home loans that finance the purchase of a new M H. Thus Vanderbilt infers that
the Agencies' understanding that traditional appraisals "are feasible" for land
home M H loans must be based on these certain FHA loan types, which typically
represent a very small fraction of all land home M H loans. At Vanderbilt, for
example, less than one-half of 1% of its land home M H loans since 2011 have
been FHA loans (304 out of 7,066).A.FHATitleIandIILending.
Even for FHA land home loans, traditional appraisals are difficult to
obtain and are prone to a high failure rate (i.e., when the appraised
value is less than the sale price). The main reason for these problems is
that HUD guidelines require the use of M H comparable sales for FHA
land home loans. Site built comparable sales cannot be used. M H
comparable sales, especially in rural areas, tend to be unavailable or

 inadequate because they are too few in number, or they are located at
greater distances from the customer's site (e.g., over 25 miles away), or
they are too much older than the M H that will secure the new loan, or
they consist of foreclosed MHs that were re-sold at reduced prices.page4.
According to an informal MHI survey earlier this year, traditional
appraisals on FHA land home loans fail around 20% of the time, due to
the lack or inadequacy of comparable sales. At Vanderbilt, the failure
rate has been even higher, around 30%.
B.

Conventional Lending.
The industry's experience with FHA land home loans should be both
instructive and sobering. The 20% to 30% failure rate of traditional
appraisals on FHA land home loans is due to the collateral type (MHs),
not the loan type (FHA). Thus if the TILA appraisal rule were to take
effect as proposed, we should expect that the 20% to 30% failure rate
for appraisals on FHA land home loans will also apply to conventional
land home loans. For Vanderbilt, a 30% failure rate for appraisals on our
6,762 conventional land home loans since 2011 would have eliminated
2,029 loans, thereby denying affordable housing to several thousand
people (assuming the typical loan represents a family in need of
housing as opposed to single occupancy purchasers).

MHs typically are not available for appraisal.
The new or used MHs that will secure a home only or land home M H loan typically will
not be available for a physical visit of the interior of the M H until after the closing of the
loan, much less when the appraisal is ordered. Thus it will be physically impossible for
most new or used M H loans to comply with the proposed requirement for the lender to
obtain, prior to consummation, a written appraisal that includes "a physical visit of the
interior of the property that will secure the transaction." (Proposed §1026.XX(b)(1). 77
FR at 54772.) Moreover, even if the proposed interior visit requirement were to be
removed, a traditional appraisal for most new or used M H loans will still be physically
impossible due to the unavailability of the M H for appraisal, and the resulting inability
of the appraiser to examine the HUD seals and data sheets (see #1.a above),
i. New MHs.
Typically the M H will not be delivered and installed at the customer's site, and
in many cases not even manufactured, until after the home only or land home
M H loan has closed. The appraisal, of course, must be obtained well before
closing. Thus the new M H literally will not be available for inspection at the
customer's site when the appraisal is ordered. Even in those cases when a
retailer already has a suitable new M H in inventory at its sales lot, the M H still
will not be delivered and installed until after closing. Thus again, the new M H
will not be available for an on-site inspection when the appraisal is ordered. As
with construction loans, on-site interior inspections of new MHs that will secure
home only and land home M H loans are not feasible because new MHs are still
in the process of being manufactured and/or delivered and installed when
appraisals are ordered. For essentially this same reason, the Agencies are
proposing to exclude construction loans from the TILA appraisal rule: "In
construction loan transactions, an interior visit of the property securing the loan

 ii.

is generally not feasible because construction loans provide financing for homes
that are proposed to be built or are in the process of being built."page5.(77 FR at
54733.) The Agencies should apply this same logic so as to exclude all M H
transactions from the TILA appraisal rule,
Used MHs.
A used M H, by definition, has been previously occupied. Used MHs typically
become available for re-sale either by the original owners trading them in on
new M H purchases, or by the lenders' recovery of the used MHs from the
original owners after default. Under either of these circumstances, the used
MHs typically are relocated to a retailer's sales lot for re-sale. At that point, the
same chronology will apply for used MHs as that described above for new MHs:
the appraisal will be ordered well before closing of the new customer's home
only or land home M H loan, but the used M H will not be delivered and
installed, and thus will not be available for on-site inspection, until after closing.
Again, as with construction loans, on-site interior inspections of the used MHs
that will secure chattel M H loans are not feasible. (77 FR at 54733.) Thus again,
the Agencies should apply this same logic so as to exclude all M H transactions
from the TILA appraisal rule.

d.

Land often is not available for appraisal.
Not only are the MHs themselves typically not available for appraisal before closing, but
the land on which the MHs will be located oftentimes is not identified by the customer
until well after the immediate post-application stage, when appraisals typically get
ordered. For both home only and land home transactions, buyers often pick out their
M H and apply for their loan before they decide where to locate the M H. This common
pattern for M H transactions, of course, is fundamentally different from typical site built
transactions, where both the home and the land are identified early on, before the loan
application is submitted. Thus in the world of M H retailing and lending, not only the M H
but often the land, as well, is not available for appraisal when the appraisal is ordered.

e.

Prohibitive costs of traditional appraisals.
As noted above, M H loans typically are low balance loans. At Vanderbilt, for example,
our average home only loan amount since 2011 has been $47,167. Our average land
home loan amount for the same period has been $76,003. Thus in the context of M H
lending, the cost of a traditional appraisal will usually be prohibitive, which will result in
far fewer M H sales and loans being made, which will significantly reduce the availability
of affordable housing in the United States and the total number of jobs provided by the
factory-built housing industry,
i. Land Home.
Vanderbilt's typical cost for a traditional appraisal for FHA Title I and I I land
home loans is in the range of $500 to $600. For these loans, the typical
appraised value for the M H and the land, taken together, is about $120,000,
which is on the high end of Vanderbilt's range of land home loan amounts.
Unfortunately, appraisal costs do not vary by loan type. An appraisal that
typically costs $500 to $600 for a relatively high balance FHA land home
loan will also cost $500 to $600 for a much lower balance conventional land
home loan. Using Vanderbilt's $76,003 average land home loan amount

 ii.

since 2011, a traditional appraisal that cost. $500 would have added 66 basis
points of cost to the transaction.page6.Even worse, a traditional appraisal that
cost $600 would have added 79 basis points of cost,
Home Only.
Similarly, Vanderbiit's typical cost for a traditional appraisal for FHA Title I
home only loans secured by used MHs is $450. Using Vanderbilt's $47,167
average home only loan amount since 2011, a traditional appraisal that cost
$450 would have added 95 basis points of cost to the transaction.

In both cases - for home only and land home M H loans - nearly 1% of additional cost is
added for the consumer for an appraisal that, we believe, will not provide an accurate
valuation of the transaction, and therefore will provide minimal benefit to the consumer.
2.
In
addition
to keeping
the current
definition
of exemption
"finance charge"
andtoresulting
APR
(see #3
below),
the both
Agencies
alsoland
exercise
their
authority
effectively
remove
all
M
H loans,
homeshould
only
and
(Replying
to Questions
8 and
14.) home, from the definition of "higher-risk mortgage loan."

The proposed threshold for the amount by which the A P R must exceed the applicable APOR for a first
lien home loan to qualify as a "higher-risk mortgage loan" is 1.5 or more percentage points, for loans
with principal amounts of less than $417,000 (the "jumbo" loan threshold as currently set by Freddie
Mac). (Proposed §1026.XX(a)(2)(i)(A). 77 FR at 54772.) This 1.5 percent-or-more threshold for first lien
higher-risk mortgage loans is the same as the 1.5 percent-or-more threshold that currently applies for
identifying "higher priced mortgage loans" ("HPMLs") under Regulation Z (§1026.35(a)(1)). Likewise, for
HMDA purposes, Regulation C currently uses this same 1.5 percent-or-more threshold for requiring the
reporting of HPMLs (§1003.4(a)(12)(i)).
In the section-by-section analysis of the TILA appraisal rule, the Agencies have noted, at least twice,
their current lack of sufficient data for estimating how the proposed more inclusive "finance charge"
will affect the number of loans that will exceed the 1.5 percent-or-more threshold for first lien higherrisk mortgage loans. (77 FR at 54730, 54731.) However, of more immediate concern to Vanderbilt is the
likely effect that the proposed threshold will have even if the Agencies keep the current definition of
"finance charge." Because the same 1.5 percent-or-more threshold applies to both "higher-risk
mortgage loans" and HPMLs, the 2011 HMDA data that the FFIEC recently released is both instructive
and very concerning. As the FFIEC noted in its joint press release dated September 18, 2012:
"The 2011 HMDA data also include information on loan pricing. The 2011 data reflect
the second full year of data reported under revised loan pricing rules, which determine whether
a loan is classified as "higher priced." Lenders now report loans with annual percentage rates
(A P Rs) that are 1.5 percentage points for first lien loans and 3.5 percentage points for junior lien
loans above the average prime offer rates (APORs), estimated using data reported by Freddie
Mac in its Primary Mortgage Market Survey.
"The data on the incidence of higher-priced lending show that a small minority of first
lien loans in 2011 have A P Rs that exceeded the loan price reporting thresholds. The principal
exception was for conventional first lien loans used to purchase manufactured homes; for
such loans 82 percent exceeded the reporting threshold in 2011. For conventional first lien
loans used to purchase site-built properties, about 3.9 percent of the reported loans exceeded

 the reporting threshold (up from 3.3 percent in 2010).page7.The incidence of higher-priced lending
for FHA-insured loans on site-built properties (3.8 percent in 2011) is virtually the same as for
conventional loans. The incidence of higher-priced lending for loans backed by VA guarantees is
notably smaller than for either conventional or FHA-insured loans; only about 0.4 percent of
VA - guaranteed loans were higher priced in 2011." (Emphasis added.)
http://www.consumerfinance.gov/pressreleases/federal-financial-institutions-examinationcouncil-announces-availability-of-2011-data-on-mortgage-lending/,
Thus, even if the Agencies keep the current definition of "finance charge," the 2011 HMDA data shows
that a whopping 82% of conventional first lien M H loans, both home only and land home, would have
been classified as "higher-risk mortgage loans" (due to most M H lenders' high cost of funds and high
origination and servicing costs in relation to typical loan amounts). Presumably up to 100% of
conventional first lien M H loans would be classified as "higher-risk mortgage loans" if the Agencies were
to adopt the more inclusive definition of "finance charge." Such a result, if the TILA appraisal rule were
to apply, will effectively eliminate the M H loan business in the United States. The elimination of M H
lending, in turn, will have disastrous effects on the jobs provided by the factory-built housing industry,
and also on the availability of affordable housing for low to moderate income families in this country.
To avoid these disastrous effects, the Agencies should not only keep the current definition of "finance
charge" and resulting A P R, they should also exercise their exemption authority to effectively remove all
M H loans, both home only and land home, from the definition of "higher-risk mortgage loan." The
Agencies should act in either one of two ways, either one of which will serve the public interest and will
promote the safety and soundness of M H lenders by allowing the factory-built housing industry to
continue to provide its high levels of jobs and affordable housing, as follows:
a.

b.

3.

Question 8: By modifying the proposed thresholds at which first lien M H loans, both
home only and land home, will be classified as "higher-risk mortgage loans" in an
amount sufficient to effectively remove all M H loans from this definition, or
Question 14: By excluding the class of all M H loans, both home only and land home,
from the definition of "higher-risk mortgage loan."

The Agencies should keep the current definition of "finance charge" and resulting A P R.
(Replying to Questions 6 to 9.).

By separate letters dated September 5, 2012, Vanderbilt has previously commented on the CFPB's
proposed rules for (i). Integrated Mortgage Disclosures under TILA, Regulation Z, and RESPA, Regulation
X (77 FR 51115, August 23, 2012)(see Comment Tracking Number 811080b5), and (ii). High-Cost
Mortgage (HOEPA) and Home Ownership Counseling Amendments under TILA, Regulation Z, and RESPA,
Regulation X (77 FR 49089, August 15, 2012)(see Comment Tracking Number 811082a5). In short, for
the reasons set forth in Vanderbilt's foregoing comment letters, the Agencies should keep the current
definition of "finance charge" (rather than adopt the proposed more inclusive definition), and they
should also keep the A P R alternative for the HOEPA rate thresholds (rather than adopt the "transaction
coverage rate" alternative). (See Comment Tracking Number 811080b5 at pages 3-11, and Comment
Tracking Number 811082a5 at pages14-15.).page8.

 4.

The Agencies should clarify that "the price at which the seller acquired the property" must be
limited to "retail" prices and/or acquisitions, rather than including "wholesale" prices and/or
acquisitions. (Replying to Questions 20 & 25.).

If, under the Agencies' final TILA appraisal rule, either home only and/or land home M H loans are not
excluded from the definition of "higher-risk mortgage loan," then Vanderbilt has two additional
comments for the Agencies' consideration.
The proposed "additional appraisal" will be required in situations that might constitute a "flipping"
scam. (77 FR at 54737.) Flipping situations are identified in part by comparing "the price at which the
seller acquired the property" to the consumer's purchase price. (Proposed §1026.XX(b)(3)(i)(B). 77 FR at
54772.) Proposed comment XX(b)(3)(i)(B)-1 says that "The price at which the seller acquired the
property refers to the amount paid by the seller to acquire the property. The price at which the seller
acquired the property does not include the cost of financing the property." (77 FR at 54774.) In
addition, the Agencies explain in the section-by-section analysis that the term "acquisition" will include
"property previously acquired by the seller through a non-purchase acquisition, such as inheritance,
divorce, or gift." (77 FR at 54737.)
Both of these terms, "price" and "acquisition," are overly broad in the context of M H retailing and
lending. Many M H sales, both new and used, are made at the 2,500 or so M H retailer locations that are
currently operating in the country. These M H retailers, of course, must first obtain an inventory of MHs
to re-sell to consumers. M H retailers have various ways in which they obtain their M H inventory,
including:
a.

Buying newly manufactured MHs directly from the manufacturer, for re-sale to
consumers at retail prices.
b. Taking used MHs in trade from previous owners, the value of which is applied to the
down payment for the previous owners' purchases of new MHs (much as auto dealers
take used cars in trade when selling new cars). The previous owners typically receive
something less than retail value for their trades, and the M H retailers typically re-sell
the trades to consumers at retail prices (again, much like auto dealers do).

c.

Buying used MHs from lenders after the lenders have recovered the MHs from the
previous owners after default. Again, as in the trade scenario, the lenders typically
receive considerably less than retail value for these "repo re-sales," and the M H
retailers typically re-sell the repo re-sales to consumers at retail prices.

Thus the typical methods by which M H retailers build their inventory are to acquire both new and used
MHs at wholesale prices, sometimes in non-purchase transactions (such as trade-ins), and to then re-sell
the MHs to consumers at higher retail prices. In a nutshell, that's how M H retailers (like auto dealers)
make a profit and stay in business. Similarly, when M H lenders sell their repos directly to consumers,
rather than to retailers (as described at #4.c above), the M H lenders seek to recover as much as possible
against the defaulted account balances. Sometimes the M H lenders may sell their repos for higher
prices than they "paid" upon recovery (such as with voluntary surrenders in exchange for releases from
the account balances or when M H lenders are the winning bidders at repossession/foreclosure sales).
As currently written, the TILA appraisal rule could conceivably include the wholesale prices that M H
retailers and lenders pay, whether in money or in trade or in release, within the meaning of the phrase
"the price at which the seller acquired the property." Presumably the Agencies did not mean for M H

 lenders to make such apples-to-oranges comparisons between wholesale acquisition prices and
consumer's retail purchase prices.page9.The TILA appraisal rule should be clarified accordingly. Otherwise M H
retailers and Senders will likely have to delay their M H re-sales more than 180 days in order to avoid the
"additional appraisal" requirement, which delays will likely damage both the public interest and the
safety and soundness of creditors by reducing the public's access to readily available affordable housing
and also by reducing the recovery rates of M H lenders.
5.

Creditors should not be required to absorb the costs of any "additional appraisals" or of the
copies of any appraisals that are required to be provided under the TILA appraisal rule.
(Replying to Question 33.).

Consistent with new TILA sections 129H(b)(2){B) and 129H(c), the TILA appraisal rule provides that
creditors cannot charge consumers for any "additional appraisals" or for the copies of any appraisals
that are required to be provided. (Proposed §§1026.XX(b)(3)(v) & 1026.XX(d)(4). 77 FR at 54773.) These
new statutory and proposed rule sections just now cited speak in terms of creditors not being allowed
to "charge" consumers for additional appraisals or for copies of appraisals. Unfortunately, the Agencies'
proposed comments to these sections impermissibly go beyond the language of the new statute and
proposed rule. Proposed comments XX(b)(3)(v)-1 and XX(d)(4)-1, both titled "Fees and mark ups," first
reiterate the prohibitions against charging consumers by imposing fees, but then they both go on to say
that these prohibitions also preclude creditors from recovering their costs "by marking up the interest
rate or any other fees payable by the consumer in connection with the higher-risk mortgage loan."
The additional prohibitions in these two comments are not supported by either the statutory or
regulatory language that they purport to explain. Instead, these prohibitions against mark ups represent
the Agencies' independent policy judgments about how creditors should conduct their business. The
Agencies have no legal authority to make such judgments. Nor is there any rational basis for imposing
these prohibitions against recovering basic transaction costs, other than cost shifting in an effort to
subsidize credit availability for consumers. The creditors' costs for additional appraisals and for copies
of appraisals are real costs, and any mark ups of rates or originations charges will solely be for the
purpose of recovering these costs of doing business. If mark ups to recover costs are not allowed, then
the practical result will not be to protect consumers. Instead, to the contrary, the result will be to
reduce credit availability for consumers, because creditors simply won't make any loans that "look like"
they might possibly involve "flipping" situations, even if in fact there is nothing fraudulent about the
transactions. Alternatively, creditors will simply raise their rates or other fees across the board, for all
loans, so as to create a sufficient margin to absorb these costs. Neither result will serve consumers.
Thank YOU for your consideration of Vanderbilt's comments. Please feel free to call me at 865-380-3000
(extension 2603) if you would like to discuss any aspects of our comments.
Sincerely yours, signed.

Paul Nichols
President